Alfred Marshall gave the Law of Demand. Economist Alfred Marshall was the most influential economist of his time. He brought the theories of supply and demand, marginal utility, trade, cost of production, three types of price elasticity, and many more. Famous books of Marshall are "Principles of Economics," "Money, credit & commerce," "Elements of economics." Favorite sayings of him are "all wealth consists of desirable things, that is, things which satisfy human wants directly or indirectly, but not all desirable things are reckoned as wealth," All labors are directed towards some producing effect," "Civilised countries generally adopt gold or silver or both as a money."
Economics is based on unlimited wants and how consumers satisfy them. The Law of demand focuses on those unlimited desires. Law of demand expresses the functional relationship between price and quantity. According to Alfred Marshall, "The quantity demanded bears an inverse relationship to the price of the commodity; quantity demanded increases with a fall in the price of the commodity and, vice versa, ceteris peribus."
From the above definition of the Law of demand, we draw the following conclusions:
i) INVERSE RELATIONSHIP
Quantity demanded of a commodity bears an inverse relationship to its price, i.e., at a higher price, quantity demanded falls, and at a lower price, quantity demanded increases. For example, a consumer requires 50 units at 15/-. When the price increases to 20/-, the quantity demanded falls to 40 teams and when the price decreases to 10/-, the quantity ordered increases to 60 units.
ii) Ceteris Peribus
Ceteris Paribus means other thing remains same unchanged. The inverse relationship between price and quantity demanded holds only under the assumption of ceteris paribus. Other things mean the consumer's income, cost of related goods, taste and preference, etc.
Dn=f(Pn)|Pr^0,Y^0,T^0.........
Dn= Quantity demanded
Pn= Price of the commodity
Pr= Price of related goods
Y= Income of the consumer
T= Taste & Preference of the consumer
This states that if the price of a commodity(Pn) changes, quantity demanded (Dn) will also change, other factors remaining the same. All other aspects have been given the value zero, indicating that they remain unchanged.
The Law of demand is necessary to predict the market, produce according to it, and fix the delivered prices. For example- the need for raincoats is more during the rainy season. The demand for it will not be much during other seasons. Companies set prices according to it.
The demand curve represents the Law of demand. The quantity demanded of the commodity is on the x-axis and the price of the item is on the y-axis. The demand curve is downward sloping because of the reason stated in the Law of demand theory, i.e., as prices increases, quantity demanded decreases. As price decreases, the quantity ordered increases. Demand curves and Demand schedules are tools used to summarize the relationship between price and quantity demanded. However, the Law of demand only makes a qualitative statement because it describes the direction of change in the amount of portion required but not the magnitude of change.
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